In this whitepaper, Daen Wombwell breaks down the fundamentals of when you should use capitalized interest. While most premium finance companies do not use this method, rolling the cost of the funds into the loan has some advantages over paying the interest directly. These advantages include minimizing clients’ direct payments, minimizing the effects of gift tax, and reducing opportunity costs. When designed correctly, NIW believes most clients will benefit when their premium finance strategies capitalize interest. Daen explains the conditions under which it is appropriate, when it is not, and why.
CAPITALIZED INTEREST KEY POINTS
- Comparison of guaranteed universal life premiums vs. premium finance interest payments
- Hypothetical premium finance interest payments in the 1980s
- Advantages and disadvantages
- When capitalizing interest is your best choice
For additional information on capitalized interest, click here.